Some posts ago you wrote that you’ve worked during some time. How will you value this job? Was it necessary to be succesfull entrepreneur? Do you think you could be where you are, without working as employee?

I know, there are some mistakes, but i will improve my english skill soon.

@ Matthew – I have a degree and a certainly worked one job (nearly 10 years!) … time wasted? Perhaps. But, then again I learnt how to stand on my feet in front of a crowd and speak; I learned how to sell; I learned a lot of things that helped me later …

I am definitely a mogul! I’m frugal too, in a way (I save almost 20% of my gross income on one hand, but on the other I’m not “frugal” with the other 80%!).

I’m trying to be frugal and a mogul; my “security” plan is in full effect with regard to the typical personal finance stuff – max my Roth IRA, get my 401k match, have an emergency fund.

But my “wealthy” plan is in place too – which consists mainly of accumulating rental properties (at least 1 per year for the next 8 years). I bought my condo in 06 and my first rental in February; everything is on track for me to buy my second rental in 09.

I’m unique because I’m not the type to risk it all on some business venture. I am taking business risks and using leverage, but I do it only as I can truly afford to – keeping my DTI under 35%, keeping plenty of emergency funds in the bank, and still contributing to my retirement accounts.

I am on track to have a net worth of $1MM by age 30 (and $2MM by 35) if I stick to my plan and the market cooperates.

The ‘best’ type of debt is what I would refer to as “cash flow debt”, a good example is if you had a mortgage at 5% and a “super safe” (e.g. CD and/or savings accounts) at 5%. Paying off the mortgage here is stupid! Why? You can’t get the money out of the mortgage without charges and paperwork. You can, however, get the savings account money at any moment, including to pay off the mortgage.
If you have an extra $10k floating and put it on the mortgage it doesn’t lower payments or allow forgiveness – if you lose your job you’ll get foreclosed on despite the fact that technically the due date is still ahead. Obviously the lower that super-safe investment return or the higher the debt interest the less this applies.

Leverage for business is an interesting thing. Put 10% down and if it goes up 10% you doubled your money. If it goes down 10% you lost all of it. Plus interest in both cases of course. Leverage works when you are correct and works against you just as hard when you’re wrong — too many “get rich” plans (schemes and real) that push leverage miss the downside. And don’t get cocky that you’ll do it right — why? Well, if making money on real estate is easy why would a bank loan you the money for a mortgage when they could just buy the house themselves? The market isn’t perfectly efficient but it does adapt prices to get ‘easy wins’ which makes the wins not so easy!

I’m always wary of any advice that tells me to go remortgage my house an leverage the money on investments; always ask yourself “what happens if Katrina hits?” (either metaphorically for financial instruments or literally for physical). Insurance helps, obviously, but if a real disaster hits they will be overwhelmed too!

The most important thing is to remain in control, if you’re buying stock on margin then you could be forced to sell just when the price is low in order to cover the margin; which can really destroy you. If you have the money, but want to keep it liquid then you don’t have to sell – you have to give up the flexibility of having more money liquid. If the debt can force you to make a bad decision it could be bad debt even if it’s for a good purpose (school, a business, etc.), if you can eliminate or minimize that possibility and know what you’re doing by all means use the leverage!

Or, long story short, don’t get on the sea-saw of leverage until you’ve got a big rock to ensure you’re pushing the right side up even if it’s heavier than you expect!

Well, I’m not a Ramsey by any means and I think leverage has a place.
I can insure against certain disasters but what about forecast errors? I saw the housing bubble a mile away (thanks to my bearish nature and LvMI) but a lot of supposedly smart investors didn’t; you can’t insure against that very well and I’d hate to be the next Casey Serin (obviously he did some questionable things in ethics, but is a well known name for me to leverage. Haha! I made a funny!).

Nothing is perfectly safe but sometimes it helps to have a ‘known’ exposure. To use stocks, I buy a stock long for $100 then my maximum loss is $100. If I short a stock and get $100 my maximum loss is… infinite. For the same reason I shy away from any leverage that could reasonably turn on me if the market suddenly dissolved.

I’m all for upping my gains, but leverage doesn’t up your gains – it ups your volatility, and my point is that you realizing that is key before you take advantage of it. Don’t make an investment till you know how low it can go and how low you can go — and if you can take more than it can, leverage away!